Last month, the Department of Labor (DOL) proposed a final rule changing the interpretation of independent contractor under the Fair Labor Standards Act (FLSA). The proposed changes would establish the standard as a totality of the circumstances test. This is a shift from the rule proposed during the final days of the Trump administration, which focused on core factor and non-core factors in its analysis.
When initially proposed, the DOL invited all stakeholder to submit comments on the proposed rule through November 28, 2022. Last week, the DOL extended the comment period until December 13, 2022 following complaints from business groups regarding the initial deadline.
Under the proposed rule, the factors the DOL would consider in an assessment of whether a worker is an independent contractor or an employee including:
- Opportunity for profit or loss depending on managerial skill
- This factor considers whether the worker exercises managerial skill that affects the worker’s economic success or failure in performing the work.
- Investments by the worker and the employer
- This factor considers whether any investments by a worker are capital or entrepreneurial in nature.
- Degree of permanence of the work relationship
- This factor weighs in favor of the worker being an employee when the work relationship is indefinite in duration or continuous, which is often the case in exclusive working relationships.
- Nature and degree of control
- This factor considers the employer’s control, including reserved control, over the performance of the work and the economic aspects of the working relationship.
- Extent to which the work performed is an integral part of the employer’s business
- This factor considers whether the work performed is an integral part of the employer’s business, meaning the function the worker performs is integral, not the worker themselves.
- Skill and initiative
- This factor considers whether the worker uses specialized skills to perform the work and whether those skills contribute to business-like initiative.
Additional factors may be relevant to the extent they clarify whether a worker is in business for themselves (an independent contractor) or economically dependent on the employer for work (an employee).
Employers who would like to submit their comments regarding the proposed rule can do so at federalregister.gov. Any comments submitted will become a matter of public record. The comment period will close at 11:59pm ET on December 13th.
